Capsim Report

All segments are critical for the implementation of our company’s strategy because we chose to be broad cost leaders. Cost leaders maintain a presence in all market segments by focusing on low production costs and competitive pricing. With that in mind, one segment is considered to be slightly more important than the others: the low end segment. We will compete in every market segment, but this is one of the most important due to the fact that price is the main consideration of the buying criteria at 53% importance. Our costs will be much lower than our competitors which translates into a lower market price for this product, which is ideal for our customers.

In order to increase the margin of the Low End products we would sell older aged products that have lower production. From the Segment info we see that consumers in the Low End market do not stress these two characteristics. Also, as we have learned the lower the performance and larger the size the lower the costs. We cannot increase

Company’s objective and resources. Some attractive segments may no mesh with the long run objective.

Evaluate Arch's industry and its strategic position vis-avis its major competitors. What does your analysis imply for Arch's future investment requirements and the company's ability to earn profits greater than its cost of capital?

Also, they have very efficient logistics and a low cost base such as labor, materials and facilities (Ibid, 1985). Essentially, if a firm can achieve and maintain cost leadership, it can obtain above average performance whilst the prices are still affordable in that industry. Hence, the cost leader does not try to be the industry innovator, it seeks to position its products to appeal to the average customer taste. The aimed goal is to increase efficiency and lower its costs in relation to competitors. Some of the

I. Providing the customers what they want, when they want it, all at a value.

While the cost leadership strategy can be highly successful, it can be difficult to employ. It involves marketing the company as the cheapest source for a good or service. This means that costs need to be minimized and the savings are passed onto the customers. The overall cost leadership strategy focuses on becoming the low cost producer in an industry (Porter, 2016). Firms that generally succeed in cost leadership often have access to the capital required to make a significant investment in production assets, which would represent a barrier to entry that many firms would be unable to overcome. As technology improves, competition could potentially be able to jump ahead in production capabilities, eliminating the competitive advantage.

Khare, Saxena, and Tewari (2012) found there is a need to examine all the marketing mix factors beyond price in a product-brand selection. Critical factors include good environment, great reputation, attentive sales person, a full line product portfolio product, innovation/design (in a fast-paced technology driven industry), unconditional defective product return, manufacturers ' status, quality, and country of origin (due to perceived quality). The sensitivity (price or technology) of these factors may depend on the customer class while online retailers with better reputation charge higher prices.

Normalized Historical Balance Sheets Summary Historical Statements of Cash Flows Normalized Earnings and Net Cash Flow Summary Normalized Interim Financial Statements 9  9  9  10  10  11  11  12  13  14  ANALYSIS OF HISTORIC FINANCIAL STATEMENTS Business Common-Size Financial Statements Business vs. Industry Common-Size Financial Statements Business Financial Ratio Analysis Business vs. Industry Financial Ratio Comparison 16   16  17  19  21  VALUATION OF SAMPLE INDUSTRIES, INC. Overview of Valuation

This firm is encountering diminished interest of about all the agricultural products, yet the Universal Harvester reel deals were down more than 70% when contrasted with the earlier year. Our combined gross benefit expanded as a rate of net deals from 24.1% in 2014 to 25.0% of net deals in 2015. This expansion is to a great extent because of cost-cutting measures and effective utilization of stock, basically in our agricultural products segment. AWM, Inc. merged working costs expanded by 4.6%, from $7,060,00 in 2014 to $7,388,000 in 2015. In order for a tremendously in 2016, the operating income will have to change first. For instance, AWM’s has in operating income of $-403,663, so how does they change this negative into a positive? The answer to this question is that they can increase the number of units that’s sold, which will change the contribution margin. Within this change, this will bring up a decision on whether or not to advertising will increase or decrease the sale. Similarly to operating income, the variable cost can be change as well.

"Cost leadership is where an organization accomplishes relatively lower costs than their rivals and competes across a broad range of divisions" Thompson, (2005). An organization must be willing to offer their products at the lowest possible price without making any compromises in the quality of the product. It does not imply that the company has to offer their product at the lowest market price as those products are often regarded as inferior. A company which concentrate on cost leadership strategy will be able to produce greater profit margins by marketing more product units. "Cost leadership can be accomplished by superior management, concentrating on cost-saving opportunities,

The advantage in practicing cost leadership strategy is that a firm can maintain the company’s profit and expand their market share which Lenovo would be able to do if they using direct exporting. Besides, the cost leadership strategy also makes it difficult for new companies to enter the market because of thin profit margin. (Huebsch, 2016)

In a perfectly competitive market, where all the products are nearly the same, any product can achieve

money. By bundling our software and support, the need to seek other or outside IT

There are also some risks for each strategy. Upholding cost leadership can be risky because of the requirement of frequent capital investment to sustain cost advantage, then cost surges narrow price differentials and diminish ability to compete with other’s brand royalty. Differentiation strategy has some threats, such as imitation decreases alleged differentiation, buyers need for differentiation falls. Meanwhile, the risks for focus or niche strategy are the differences in preferred products or services between the strategic market and target as a whole narrows, the cost discrepancy between wide ranged competitors and the focused firms broadens to eradicate the cost advantages of allocating a narrow target or to offset the